Last week's losses on Wall Street dragged down Chinese stocks yesterday, with the market plunging 2.59 percent in Shanghai and 3.7 percent in Hong Kong.

Shanghai continued its fourth straight day of decline, with fears of a further tightening of monetary policy adding to expectations of a correction induced by the US downturn.

The benchmark Shanghai Composite Index slid 150.72 points to close at 5667.33, with losing stocks outweighing winners by 678 to 204.

Though the weak performance of the global equity markets is seen as a reason for the correction, analysts believe the movements in the other markets, including Hong Kong, have a limited effect on the mainland stock market, which is only partially opened to foreign investment.

"The wide swings in the US are not expected to have as direct an impact on the mainland market as on other overseas markets," said Zhang Xiaojun, an analyst at China Securities.

"The market is due for a short-term correction," said Wu Gang, an analyst at Orient Securities. "Investors are jittery about any movements in or outside the market."

But Wu added that the "short-term" correction would not change the uptrend in the longer term.

Feng Yuming, an analyst at Orient Securities, said the mainland market in the fourth quarter would go up at a more moderate pace compared with the previous quarters this year.

"The corporate earnings posted by many companies in the third quarter are largely within investors' expectations, and will not push the market to dramatic levels as before," Feng said.

The smaller Shenzhen Component Index yesterday also dropped 2.42 percent, or 455.39 points, to close at 18379.41.

Hong Kong, tracking Wall Street, dived 1128 points as soon as the market opened. Though the fall was narrowed to 750 points by midday, short-selling pressure brought the index down to 28373, shedding 1091 points. The turnover on the bourse was HK$162 billion.

The China Enterprises Index, which mirrors the performance of Hong Kong-listed mainland companies, fell 913 points to end at 18808.

The two largest market movers led the plunge. Shares of HSBC shed 3.4 percent to HK$145.5, while China Mobile saw a 3.9 percent drop to HK$142.2. All 40 Hang Seng Index constituents went down.

(China Daily October 23, 2007)